I am writing to you regarding the fiscal challenges many States are facing relative to their education budgets. First, I would like to review the maintenance-of-effort (MOE) requirements in section 14005(d)(1) of the American Recovery and Reinvestment Act of 2009 (ARRA). As a condition of receiving funds under the State Fiscal Stabilization Fund (SFSF) program, your State has assured that it will provide, for each of fiscal years (FYs) 2009 through 2011, at least the levels of support for elementary and secondary education and for public institutions of higher education as it provided for FY 2006. A State has a continuing obligation to meet the SFSF MOE requirements through FY 2011 even if it spends all of its SFSF funds prior to that fiscal year.

Please note that, as part of the MOE requirement, States are required to amend their SFSF applications to reflect any known changes to a level of support for education previously reported and to provide data for unreported years as this information becomes available. Detailed guidance on the SFSF MOE requirements is available on the U.S. Department of Education's (Department) Web site at http://www2.ed.gov/programs/statestabilization/applicant.html.

As you know, approval of a State's SFSF phase one and phase two applications is an eligibility requirement that must be met before a State may receive a Race to the Top grant. Continued compliance with these MOE provisions will be a grant condition on receipt of any Race to the Top funds.

The Department continues to monitor State budgetary actions to ensure that each State meets its fiscal obligations. If the Department determines through monitoring or an audit that a State is failing to do so, it will take appropriate enforcement actions against the State. Such actions may include, among other things, the disapproval of the State's application for SFSF phase two funding or the recovery of SFSF funds previously awarded to the State.

At the same time, I do not underestimate the current fiscal challenges and pressures that exist in States and districts around the country. Many difficult decisions and hard choices must be made. In making these decisions, you should be aware of the Federal education funds that the Department has previously awarded to your State and that may still be available to support State and local activities consistent with applicable Federal requirements. These amounts include, but are not limited to, funds appropriated under the ARRA.

[Note: this section of the letter sent to each state provides summary information about the individual state's fund balances and additional funding from the Department's FY 2010 appropriation. Please see the complete text of all the state letters (PDF, 220K) for this information, or the attachments for the details about funding amounts.]

I know that you agree with me that all children in America deserve access to a high-quality education that prepares them to succeed in college and the workplace. It is our joint responsibility to support such an education in order to ensure our Nation's future prosperity. I hope this information is helpful in planning your State's education budget and using all available funds to continue your improvement efforts. If you have further questions, please see below for the appropriate Department contact: